20 October 2016 Insurance

Virtual reality will generate $20bn in potential losses by 2020

Augmented and Virtual Reality (AR and VR) technologies are creating new forms of risk and have the potential to generate potential losses to the value of $20 billion by 2020, according to a report from KPMG.

KPMG said insurers must keep up with these developments and seize opportunities as the technologies evolve, as the companies using them will need insurance for personal accidents, business reputation damage or enhanced data security cover.

The report suggested that consumers will increasingly suffer accidents whilst playing AR games and companies will increasingly become responsible for securely storing ever more sensitive information, such as location data.

Paul Merrey, global strategy group insurance partner at KPMG, said: “There are some obvious risks associated with AR and VR technologies which aren’t currently covered by insurers.

“Pokémon Go, for example, was a huge success but there were reports of some serious personal accidents, in California two distracted gamers fell around 50ft off a cliff. Whilst some insurers are already looking at this market, there remains work to be done to understand the full extent of the potential risks and applications.

“The uses of augmented and virtual reality are only beginning to be understood. It has potential well beyond gaming - it could actually revolutionise how insurers run their own businesses. Imagine a world where an oil rig risk assessment could be done through virtual reality goggles with an oil rig worker on the ground and the insurer at his desk in London.

“At present, only a few insurers are actively following AR and VR developments and considering how to address the changing risk landscape, yet there is a huge potential market at stake. Insurers that fail to keep pace with this technology could miss a significant opportunity.”

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